Tuesday, April 20, 2010

Islamic Economics: “Has Islamic Economics developed into a full fledged discipline yet?


Islamic Economics is now the most debated topic in most of the Muslim developing countries nowadays. The issues of implementing an Islamic economics system is not only being discussed in the third world Muslim countries and developing countries, but also in well-established countries such as The United States of America, The United Kingdom and many other European countries where the conventional economics theory is highly recognized and being practised widely there. We recall that it is the conventional economics that dominates almost every part of the world. Its modern economic thinking and ideologies have been widely accepted and has successfully developed throughout the decades. The conventional system manages to uphold its discipline after going through years of painstaking process of development spanning over more than a century. The developments were done successfully without any interruptions. Everything was in order and went accordingly as it was reflected in the publication of numerous journals, books and research reports throughout the entire world. Everyone participated and took place in the development. This includes individuals, students, universities, researchers and government. Despite the achievement that Islamic economics has made over 30 years, the development process of Islamic economics as a scientific discipline has a long way to go in order to offer a complete and comprehensive economic system. Therefore, this paper will critically discuss whether Islamic Economics has developed into a fully fledged discipline. The writer will further elaborate on this topic by explaining the issues arising within the development of Islamic economics and also the recommendations for those issues.


When Muslims struggled to get freedom from colonization all over the world, it was necessary for them to take a stand on how they would organize the country after they got independence. One of the important elements in the demand for freedom was the idea that Muslims would be free to practice their religion. Muslim leaders all over the world appealed to Muslims to participate in the struggles for liberation in the name of Islam in term of social, political and economic system. Thus, in 1976 the term “Islamic Economics” came into light after the international conference made in Makkah al-Mukkarramah. This conference and several follow-up conferences and seminars motivated several Muslim economists to explore the theory of Islamic economics and economic system that teachings of Islam entail.

Allah (swt) says:

كُنْتُمْ خَيْرَ أُمَّةٍ أُخْرِجَتْ لِلنَّاسِ تَأْمُرُونَ بِالْمَعْرُوفِ وَتَنْهَوْنَ عَنِ الْمُنْكَرِ وَتُؤْمِنُونَ بِاللَّهِ

"You are the best of the nation raised up for mankind because you enjoin what is right and forbid the wrong and believe in Allah”(Al-Quran Surah Ali-Imran 3:110)

Allah (swt) has blessed us as being the best nation raised up from humanity because we enjoin the good and forbid the evil – we need to realise our responsibility of speaking our against the evil and injustice that we see globally today. One of these great evils we see around us is the economic injustice and oppression caused the world over by the current capitalist world order.

The current financial crisis has seriously eroded confidence in the Western world and has exposed the free market. However the Western world when looking at alternatives only see remnants of Socialism or some state intervention in economy as feasible and workable systems. It is also this reason that allows free market ideologues to continue citing more regulation, transparency i.e. more capitalism with some tinkering as solutions.

This crisis represents an opportunity for all Muslims to present the Islamic economic system as an alternative. We have to realize to consider that when Marx wrote his theories of Communism in the 1800’s whilst sitting in Britain, his ideas although many people disagreed with them were seen as a viable alternative, this is why Lenin later took up these ideas, formed a party based upon them and they were eventually embodied in a state. This occurred even though these were new theories that had no history of implementation. We have to then consider that unlike Marx who denied the existence of Allah and whose ideas were disproved by the clear reality of the failure of Communism, we have the truth from Allah (swt) and also have a history of the implementation of Islam.

The economic system of Islam derived from the Quran and the Sunnah and over a thousand years of history of its implementation. Based upon this we must initiate thinking amongst the ‘left’ and the right’ and to demonstrate to them how Islam is not just a religion like the others but is a comprehensive ideology able to deal with the current crisis’s that humanity is faced with.

Despite the achievement that Islamic economic has made over 30 years, the development process of Islamic economics as a scientific discipline has a long way to go in order to offer a complete and comprehensive economic system. Although some people might disagree, it is undeniably true that the Islamic Economics has not developed into a full fledged discipline because of the nature and definition, narrow scope of perspectives and lack of impacts towards the development of Islamic economics.

Argument 1

First and foremost there are uniformity of opinions among Muslim economist related to nature and definition of Islamic Economics. The diversity of opinions among Muslim economists is extreme. In my view, the Islamic economists do not mutually agree even on the definition of “Islamic Economics,” and no clear model of what an ideal Islamic economic system would look like in concrete and practical terms. Their views can be classified into two categories. The first category includes opinions of the minority group, which regard Islamic Economics as a branch of general science of Economics and should not be considered an independent discipline. Among the scholars who are the main exponents of this viewpoint are Laliwala, Haq, and Siddiqui.

Laliwala (1989) in his writings has endeavoured to integrate Islamic Economics with the secular science of Economics. He holds that:

“Economic literature insists on the acceptance of Islamic goals, its Godly, Universal, brotherly vision, and its specific terminology like Zakah, Sadaqah, Infaq, Waqf, Shirkah, Modaraba, Riba etc. Islamic definition of economics should not be separated from the general definition of economics. The laws of Islamic Economics remain the same; even the behaviour of economic agents become moral and is not found to be selfish and self given in the Islamic society. The centralization of Islamic values will not change the laws of science of Economics.”(pg.129)

The other scholar was Haque (1992) whereby he views the new disciplines as a fruitless effort of the Muslim Economists because he finds a clear dichotomy between religion and modern sciences. The progress of science critically depends upon formulation of testable and refutable hypotheses while religious faith implies absolute certainty of final truth. Hence, he contends that efforts to develop the new discipline cannot succeed. Moreover he is also critical of the religious-legalistic approach of Islamic Economics because it does not help in understanding the operation of modern economy. He says, the interpretation of the terms Riba, Zakat and etc. will vary from feudal to modern times as over-all economic conditions have changed. He also considers Riba, Mudarabah, and etc as medieval categories having no relevance in modern times. As a matter of fact, he is doubtful about the efficacy of Islam in providing a viable solution to the economic problems of human beings.

On the other hand, a dominant majority of Muslim economists have offered more plausible views about the concept and scope of Islamic Economics. Mannan, Khurshid, Hasanuz Zaman, Akram Khan and Arif are articulate advocates of this group.

Mannan (1986) defines Islamic Economics as a:

“Social Science which studies the economic problems of people imbued with the values of Islam” (pg.18)

Mannans definition tries to bring back the focus of Islamic Economics to the right direction. In his conception, this new discipline studies economic behaviour in the ordinary business of life of the Islamically inspired and practicing Muslims. This definition, however, creates unnecessary boundaries of practicing and non-practicing Muslims. Another deficiency which ties in his definition relates to identifying economic problems in the same way as in secular economics. For instance is the relationship between unlimited wants and scarce means.

Hasanuz Zaman (1984) has suggested a tentative definition of Islamic Economics. According to him:

“Islamic Economics is the knowledge and application of its functions and rules of Shariah that prevent injustice in the acquisition and disposal of material resources in order to provide satisfaction to human beings and enable them to perform their obligations to Allah and the society.” (pg. 85)

This definition suffers from certain limitations. Firstly, it reduces economic problem to acquisition and disposal of resources -which may broadly be interpreted as production and distribution activities. In other words, it does not cover the consumption and exchange aspects of economics. Next, this definition does not include those situations of economic activities which can be generalized from Islamic history through inductive reasoning. Lastly, it tends to limit the overall scope of the science of Islamic Economics.

From the definition above, the writer can conclude that these diverse definitions from the scholars will lead to the different implications for the development of the discipline. It is true since nowadays there are still many Muslim that is not aware with the worldview and discussion of Islamic economics and the problem might affect in term of understanding of the subject for those who are new in the field of Islamic Economics especially for the new generation and also the Non-Muslim. Because of the different views and understanding of Islamic economics, thus, it is not been put together into a comprehensive model. There is lack of uniformity. This is yet another problem which needs to be addressed both at scholarly and also the operational levels.

Argument 2

Secondly, Muslims look at Islamic Economics from narrow scope of perspectives. Moreover, we are still in need of human capital, manpower, resources that really competent to expand Islamic economics and could strive together in developing the Islamic economics. Most Muslim nowadays is psychologically defeated when we talk about the objective and goals of an Islamic economics system. This is because we are trapped in the conventional system for centuries and to revive it is something impossible to certain people, there are also people who downgraded the effort of striving for Islamic economics.

According to Khaled (2009), Muslim leaders all over the world have been faced with the problem with the problem of diagnosing the cause of the ills of Muslim society and prescribing cures. An inferiority complex has led them to imitate Western approach without critical thought about those aspects of Western knowledge, technology and institutions which are relevant and useful for us. Syed Hussein Al-Attas (1972) has observed a few decades before, namely, in the rise of the ‘captive mind’. As explicated by Alatas in his book ‘The Captive Mind in Development Studies’, the captive mind is the way of thinking is dominated by Western thought patterns in an imitative and uncritical manner. Some of the basic characteristics of a captive-mind person are as follows:

1. A captive mind is uncreative, and hence incapable of raising original problems.

2. It is incapable of devising an analytical method independent of current stereotypes.

3. It is incapable of separating the particular from the universal in science and thereby properly adapting the universally valid corpus of scientific knowledge to the particular situation.

4. It is fragmented in outlook.

5. It is alienated from the major issues of the community.

6. It is alienated from its own national and religious traditions in the field of its intellectual pursuit.

7. It is unconscious of its own captivity and the conditioning factors making it what it is.
8. It is not amenable to an adequate quantitative analysis but it can be studied through empirical observations.

9. It is the result of the Western intellecto-cultural dominance on the rest of the world. (pg. 192)

Besides that, Islamic economics nowadays is too focused in Islamic banking and finance. In relation to Islamic economics, most Muslims will start to think about Islamic banking. According to Khaled A. Hussein (2007):

A large part of those economists who have or had the ambition to develop a scientific theory of Islamic economics and development of an Islamic economic system are not very appreciative of directions in which Islamic banking system has developed itself. They do not see a direct relationship in this development and the claim that Islamic economics promises a paradigm to give a better economic future to mankind. The fundamental pillars of Islamic economics like emphasis on economic justice, endogen zing Islamic ethics into objective function and market behaviour, significance of risk sharing in developing productive organizations etc. are hardly visible in the development of Islamic banking (pg.57).

The progress of Islamic banking in the last thirty years is unprecedented; therefore there are many issues and objections arising. It mostly relates to the Shariah issues regards to the products promotes by the Islamic banks. While in Islamic Economics, with its concern for justice, equity, poverty, and its multidimensional conception of human development represents a paradigm shift and a radical alternative to conventional neoclassical views.

Asad Zaman (2008) said:
“Numerous papers introduce islamic concepts entirely within a neoclassical framework, or else make minor adjustments to it, and therefore cannot from a basis for a paradigm shift. Another set of papers discusses the radical concepts offered by islam in a general philosophical way, without offering any means of operationalizing these concepts (pg.2).

In addition, Asad Zaman (2008) was among the scholars in Islamic economics that believe that we should have our own framework instead of imitating the Western style of economics. Among the points that he pointed out in most of his papers is that Islam urges the feeding of the poor, and condemns those who do not do this, Muslim economists have brought up the issue of poverty in their writings well before mainstream economics were paying attention to it. However we have participated only marginally in the huge literature which has since developed ­literature on basic needs, measurement of poverty. From my opinion, because of too focusing in Islamic banking makes we neglect other elements that are also important in the development of the Islamic economics.

Counter Argument and Refutation

However, the opponents argue that the development in Islamic Economics, in the midst of the awakening of the Islamic Ummah, has in actual fact regained its momentum. This phenomenon can be seen occurring at both the theoretical and implementation level. Since more than a decade ago, we have seen vast literature on Islamic Economics, in the form of pamphlets, articles, seminarial papers and books being published. According to Syed Omar Syed Agil (2005), concomitant with these efforts include the continuous development in the teaching of Islamic Economics and the discussion on the subject matter in conferences, seminars, religious events, organized by political and non-political organizations throughout the Muslim World.

Nevertheless, this argument and claims seemed to be untrue and can be refuted based on the argument given by Prof Aslam Haneef (2009). He said that despite the active interest in the area of Islamic banking and finance, one is still faced with the fact that research in Islamic economics has declined. In the context of Kulliyah of Economics and Management Sciences, International Islamic University Malaysia, the research agenda and publication record in the area of Islamic economics is still very much in its infancy. Even the number of academician and researcher who are fully dedicated in this field are not enough, indicating a serious need to re-focus on creating the next generation of Islamic economists especially the graduate from Kuliyyah Economics and Management Sciences. Moreover, the enthusiasm of the late 1970s and 1980s Islamic Economist Scholars has gone and the growth rate of people still actively working in Islamic economies especially in the higher education has declined because of the wealth attraction from the banking industry. Thus, the next generation of Islamic economists has become quite a rare breed. According to him, in order to face these problems we must devote sufficient resources, both financial and human, to do research in what is called the ‘missing fard ‘ayn’ component in Islamic economics, banking and finance for example is the foundation or usul of Islamic economics.

In addition, it would probably be accepted that a huge proportion of these publications and research nowadays are focuses more on Islamic banking and finance, not in Islamic economics, especially in areas dealing with the theory and foundations. According to Nazim Ali (2007) some major publishing houses based in the west have become involved in publishing materials in Islamic Economics and Finance. However, a cursory look into the titles produced in the last five years indicates a very clear bias to Islamic banking and Finance. The missing part is Islamic Economics. It can be conclude that the commercial interest and market forces totally determined the direction and areas of research. Thus this unhealthy trend must be stop and cannot allow this to continue.

Besides, the allocation of fund to do research is mainly for the Research and Development (R&D) for Science and Technology. It is a fact that Muslim countries, even those that are considered Middle-income, are not spending what they should be on R&D especially on the area of Islamic Economics. We can conclude that the amount of money spend on the development of Islamic Economics would be relatively small.

Recommendation and Conclusion

Majority of the people do not really understand what Islamic economics is about. They think Islamic economics is just about the transaction that is free from riba. In fact, they also do not know what is riba really is? Hence, to understand the term and definition of Islamic economics is very important. Again, Islamic economics also did not just deal with Islamic banking alone; it covers every aspect of human life. Therefore, there should be awareness among Muslims to show the need of Islamic economics in our daily life especially for the policymakers, bankers, the business community, industrialists, Shariah Scholars, students of business and economics and the people at large need to know what Islamic economics is, what its features and philosophy are and how it works.

In addition, from the academic perspective, we have to establish our own Islamic knowledge. In simple word, the Islamic scholars should produce more books and papers regarding education on Islamics Economics as a whole. Moreover, the books and papers should be written in Islamic ways, which does not neglect the standing of Al-Qur’an and Sunnah and must be comprehensive in term of contents and etc. In addition to the Quran and Sunnah, Ijma, Qiyas and Ijtihad provide a hierarchical framework of sources of rules governing Islamic economics.

The observation shows that students are still dependent on the western scholar’s writing because of the small amount of books and papers regards to Islamic economics. The dependent towards western scholar’s writing may influence us. That is the reason why we are in need of the Islamization of Knowledge (IOK) as what mentioned by Ismail Faruqi (2009) in his framework which stated that IOK is about recasting the modern knowledge into the Islamic knowledge by redefining, reinterpreting, eliminating and etc. Also it is an attempt to instill (tadrib) the Islamic values and historical aspects of Islam into the modern discipline.

An important part of the future agenda should be to write systematic and uninterrupted history of economic thought in Islam. There is also a need to prepare textbooks on the subject to fulfil the growing needs of the departments of Economics in the wake of introducing study papers on the history of Islamic economic thought at the under graduate and graduate levels. Through education we may increase the number people who will strive for the implementation of Islamic economics. It is the time for us to return to the glory time of Islam where people from the western and all over the world are using our Muslim scholar’s writing in studies.

Besides, the most important thing that we need to focus is the Research and Development (RND) of Islamic Economics. It is true since the RND play a vital role in order to ensure the sustainability and existence of Islamic economics is practically be relevant which is covered all aspects of life especially when dealing with the Maqasid As-Shariah.

According to Muhammad Ayub (2007) :

“The primary objectives that Shariah tends to realize are the protection and preservation of:

1) Religion

2) Life

3) Progeny – family unit

4) Property

5) Intellect

6) Honour (pg 23)

In the context of Research and Development, the challenges facing by Islamic economics is to creating awareness among the stakeholders on a large scale and convincing the people that the theory or the model of Islamic economics is workable. Therefore, the amount for money spends on research regarding to Islamic economics must be at par with the level of amount spend on others research especially related to the science and technology.

It can be done by creatively create a fund that is endowment. Moreover, it is important for the researcher to convince all the stakeholders that the area on research of Islamic economics and the funds obtained will be used in the most efficient way. It would be a great mistake to under-fund research in Islamic economics more so to be eager to find for immediate results or the practical solutions.

From the above discussion, the writer stated that Islamic economics has not yet developed into a full-fledged, independent discipline based from the issues and also the situation above. However, there are a positive ways and approach has been taken in order to ensure the Islamic economics someday will develop into a full-fledged and independent discipline. It is because, the world nowadays somehow is starting to realize and see the importance of Islamic economics.

Therefore research and development about Islamic economics and effectiveness and efficiency of this system must be continuously going on. This is to prove to the society that Islamic economics has its own advantages that make it differ from the conventional economics. And most important is that these advantages had make Islamic economics the best system if were to compare to other systems.

Besides that we must have at least a country that already implement a holistic approach of Islamic economics. The reason is to show to the world that the facts about Islamic economics is not only good in theoretical but also in practical. Today we still did not have any country that is practicing Islamic economics. Thus we must have at least a country that is on the progress of establishing Islamic economics in that country.


Haque, Zial: “Nature and Methodology of Islamic Economics: An Appraisal” paper presented to the Eighth Annual General Meeting of the Pakistan Society of Development Economists, January 7-10, 1992, Islamabad’

Khaled A. Hussein: ‘Islamic Finance and Economics as Reflected in Research and Publications’ Paper presented at Workshop organized by INCIEF, Kuala Lumpur, 2007.

Khaled A. Hussein. Islamic Economics: Current State of Knowledge and Development of the Discipline. Retrieved August 28, 2009

Laliwala, I.J., “Islamic Economics: Some issues in definition and Methodology”, Journal of King Abdul Aziz University: Islamic Economics, Vol. 1, No. 1, Jeddah 1989, Pg. 129-131.

Lecture Note on ‘Islamization of Knowledge’, subject of Issues in Islamic Economics, Semester 1, 2009/2010

Mannan, Abdul (1986) Islamic Economics.Theory and Practice,The Islamic Academy Cambridge, p. 18.

Muhammad Ayub, Understanding Islamic Finance,Wiley Finance (2007) Pg.23

‘Research in Islamic Economics: The Missing Fard ‘Ayn Component’ Paper presented at the 7th International Conference on Islamic Economics and Finance, King Abdul Aziz University, Jeddah, April 1-3, 2008.

Syed Hussein Al-Attas, “The Captive Mind in Development Studies”, International Social Science Journal (ISSJ), Vol. 26 (4), 1974, Volume 24 (1), 1972

Zaman, Hasanuz, SM. 1984, “Definition of Islamic Economics”, Journal of Research in Islamic Economics, Vol. 1, No. 2, (winter 1984). Pg.85